Small businesses will get a £2,000 tax cut and new rules to protect them
against late payment by big customers, David Cameron will promise.

The Prime Minister will highlight Coalition plans to give businesses a new “employment allowance” to reduce their employer national insurance bills.

Big companies could also face fines if they delay payments to small suppliers, the Prime Minister will disclose.

Mr Cameron will present the policies as evidence that the Coalition is backing small firms, “the lifeblood of our economy”. His move comes after Ed Miliband, the Labour leader, sought to appeal to small businesses, promising to cut their business rates by increasing corporation tax for big firms.

Legislation for the new tax allowance will be published today. Downing Street said the measure, promised in this year’s Budget, will benefit 1.25 million companies, 450,000 of whom will no longer pay any national insurance. Over 90 per cent of the benefit of the allowance will go to small businesses with fewer than 50 employees, the Government said.

Speaking to business leaders in the east of England, Mr Cameron will stress the Coalition’s commitment to small firms. “It’s businesses that get wages in people’s pockets, food on their tables, hope for their families and success for our country,” he will say. “Small business and entrepreneurs are the lifeblood of our economy and this government is firmly on their side.”

Mr Cameron will also promise to address a persistent complaint of small firms: the time big customers take to pay them for goods and services.

Some surveys show that 85 per cent of small and medium-sized companies have recently experienced problems with late payment. Katja Hall of the CBI said that late payment is a serious issue for all businesses “but particularly for smaller firms, as cash flow is their life blood”.

Although there are rules that companies can use to compel bigger firms to pay more quickly, many smaller companies do not use them “for fear of falling out with their customers,” she said.

Mr Cameron will unveil a range of measures ministers are considering to push big firms to pay up more quickly.

Persistent late payers could effectively be named and shamed under new transparency plans, to highlight good and bad records on payment.